The Wolf Of All Streets - Is The Global Meltdown Over? Find Out If Black Monday Will Strike Again – And When!

Episode Date: August 12, 2024

Join Dave Weisberger, Mike McGlone, and James Lavish as we break down what's happening in macro and crypto! Dave Weisberger: https://twitter.com/daveweisberger1  James Lavish: https://twitter.com/jameslavish  Mike McGlone: https://twitter.com/mikemcglone11  ►►WE ARE ON ROUNDTABLE (THERE ARE NO BUTS AND YOU CAN EARN REWARDS!) 👉https://roundtable.rtb.io/shortUrl/JpOPfKd ►► JOIN THE FREE WOLF DEN NEWSLETTER, DELIVERED EVERY WEEKDAY! 👉https://thewolfden.substack.com/   ►► The Arch Public Unleash algorithmic trading. Discover how algorithms used by hedge-funds are now accessible to traders looking for unparalleled insights and opportunities!  👉https://thearchpublic.com/  ►►OKX SIGN UP FOR AN OKX TRADING ACCOUNT THEN DEPOSIT & TRADE TO UNLOCK MYSTERY BOX REWARDS OF UP TO $60,000!  👉https://www.okx.com/join/SCOTTMELKER  ►►TRADING ALPHA READY TO TRADE LIKE THE PROS? THE BEST TRADERS IN CRYPTO ARE RELYING ON THESE INDICATORS TO MAKE TRADES. Use code '10OFF' for a 10% discount. 👉https://tradingalpha.io/?via=scottmelker  ►►NGRAVE This is the coldest hardware wallet in the world and the only one that I personally use. 👉https://www.ngrave.io/?sca_ref=4531319.pgXuTYJlYd  Follow Scott Melker: Twitter: https://twitter.com/scottmelker   Web: https://www.thewolfofallstreets.io   Spotify: https://spoti.fi/30N5FDe   Apple podcast: https://apple.co/3FASB2c   #Bitcoin #Crypto #MacroMonday The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. This video was created for entertainment. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this video constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.

Last Monday saw a meltdown in global markets with $6.5 trillion wiped from stocks just alone. Of course, we've seen a major bounce since people talking about the carry trade unwinding, meaning that everything must be all better, right? Well, is there more to come? And if so, what can we look forward to determine when that might happen? It's Macro Monday. I've got McGlone, Weisberger and lavish. Let's go. What is up everybody? I'm Scott Melker also known as the wolf of all streets before we get started, please subscribe to the Let's go. a little casual today. What's the occasion, Mike? You going on TV, real TV?

Well, I'm going to try to. Yes. Right after we speak, I have to go on and talk about commodities. And I don't know if sometimes these are indicators of peaks or trials, but today I'm going to be pointing out how commodities are so sold out that it's a question of how much more they can, they usually have to bounce to go back lower. They're basically a bear market, but hedge funds are so sold out. That's what they basically want me to talk about. And gold, gold is, I'll paint out one comment about gold. I just got out from a morning meeting. Our equity person usually speaks about seven minutes. I usually speak about two minutes. And it's very simple. Gold is beating the S&P 500 on a year to date,

one year, two year, three year basis. You don't hear a lot about that. That's very simple. Gold is beating the S&P 500 on a year to date, one year, two year, three year basis. You don't hear a lot about that. That's total return. I'm assuming that James is drinking water and Dave is drinking some sort of highly caffeinated energy beverage. It's going to get him amped today. No? I don't need an energy beverage to be amped today. But no, this is a San Pellegrino. God help us. The San Pellegrino water. Nice. Oh, wow. It's going to be amped today but no this is a San Pellegrino water nice oh wow is a yerba mate capsule so if I do need caffeine it's at hand

you never know he's gonna hit like 9 30 and he's gonna know that he's got a good monologue coming passionate he's gonna pop that thing but James listen we have the title here is a global meltdown over find out if black monday will strike again and when i kind of actually based this on your uh your newsletter right you gave a very good explanation of the carry trade which i think we covered quite well actually last monday in real time as it was happening so i'm assuming our audience understands it relatively well. We have, I think JP Morgan was saying it's 50% unwound, another bank saying 75% unwound, but you've got to imagine that the yen is still sort of a canary in the coal mine to some degree, right? Yeah. I mean, well, for the listeners who didn't get the end of the story for last week, because we left the podcast as the markets were kind of melting down. But

the long and short of it is, first, we don't know how big the trade is. And we've all seen the reports and heard the reports of $20 trillion. That came from a Deutsche Bank analyst who basically just looked at the total balance sheet of the uh japanese government and said that it's you know 505 percent of gdp and so you know 505 of 4.2 trillion us dollars worth of yen is 21 trillion dollars and so he said when it's basically all a carry trade and i i don't really get that math i don't really get that math. I don't see how that's right. So it's to me, and I had talked with Lynn Alden about it. To me, it's more of just that cross-border exposure. And if you look at that, it's probably close to 1.7 trillion. But we all know that you get $1.7 trillion and you buy treasures that you can then lever that up. So there is

absolutely going to be leverage in this trade. Maybe it's $3 to $5 trillion in total is what my guesstimate is. But the long and short of it is at the end of that trade, so what was going on is that feedback loop that we talked about where you've got the yen strengthening and it's primarily driven by that yen bought into strength and short covering because the Bank of Japan barely raised rates. It wasn't the amount of the change. It was just the fact that they actually raised rates for the first time since 2007. So then risk assets are sold around the world and investors then use those proceeds to buy the U.S. treasuries. And those yields fall because they're going to a flight to safety. But those yields fall and the falling yields weaken the U.S. dollar.

The yen strengthens and then the cycle kind of repeats. So we saw a cascade of selling in the risk assets around the world. But right at the end of it, the next day, I think it was, the Bank of Japan came out and said, whoa, whoa, whoa, wait, we're not going to do this again. We're not going to raise rates if the markets are unstable. And what's so ironic about that is the markets were not unstable. I mean, there were a lot of factors that went into this trigger. There was a lot of pressure with people worried about the US falling into recession.

We had the SOM rule was triggered. People were worried. We've got, what is it, 4 percent of one full percent of rate cut built into the Fed futures right now by year end. So people are expecting a rate cut. They're wanting a rate cut. The risk assets, as Mike had pointed out last week, had kind of peaked about eight weeks ago. And then they were they're coming down off that peak. And then this just triggered a cascade. So when everybody asks, you know, what, something could break, something might break, something might break. Well, the carry trade broke and that's what happened. And so the Bank of Japan rushed out and said, don't worry, we're not going to do it again. And here we are going, you know, we're marching right back into risk assets. So.

Question for you. Yeah. And since you talked with Lynn and others, what are the odds that the Bank of Japan and Powell and probably Lagarde weren't on multiple telephone calls where they were assured, we won't allow the yen to go back up towards 160. We will help you.

Yes or no? I mean, look, I don't know what their conversations are in the background, but I would be shocked if they didn't have conversations. Shocked. And whether that comes through with some sort of agreement for swaps or whatever it is, we haven't seen swaps on the balance sheet. So I'm not sure, but it's, it's definitely interesting. And so I would be shocked if they didn't, if they didn't coordinate this because it was such a massive move. So it was such a sharp move so quickly.

So. So I know what that, I don't know what Dave's ring music is. I forgot to turn the ring of the ringtone off the ringer off. It's off now. Sorry guys. Yeah. So, so ring tone off, the ringer off. It's off now. Sorry, guys. Yeah. So the question is, is it over?

The reason I mention it is fear of howitzer generally means you don't have to use howitzer. Yeah. You know, and the Fed learned, I mean, in the Silicon Valley bank crisis, they effectively told the market, we have this howitzer. It's bigger than you could possibly imagine, but they used a fraction of it. And effectively, in these sorts of markets, that feels to me to be what's going on, which is fine. I mean, you know, effectively, if what you're worried about is, to quote Mr. Suave over there, the great reset. You're afraid of the great reset.

You're afraid that the entire market is playing a game of musical chairs, and there aren't enough chairs for everybody to sit down. Then you're going to do everything in your power not for the music to stop. And I think that's where we are. And we've said all along, I mean, you remember last week. Last week, we were experiencing it live. I just went back and replayed it. It had bottomed at 49. It was at 52.

I said 56 is baked in the cake for the day. You guys thought I was nuts. That's actually where it got to, so I was feeling pretty good. So I had to take my victory lap. Okay, yay me. Great. Now we move on to the next. And here we are a week later.

And if you look at a chart, and it's the easiest chart in the world on CoinMarketCap. Let's look at a chart of Bitcoin for the last year. And you will see that we entered into a trading range at the end of February. And we have not left that trading range since the end of February. It is exceedingly clear. Actually, the range was, the bottom of the range was established on the 15th. It was around 52,000. It hung around there for 10 days. It then went higher and we are now into what I would call call a basic trading range we are right now almost bang in the middle of the range that we cut out that is six months of sideways trading now to give our our nautical host the victory lap in february he was saying the most

likely scenario is we'll go after the halving is we will go sideways for four to six months. Well, guess what? It's been six months. That doesn't mean you can't go on for a couple more, but that's where we are. And that's as far as Bitcoin is concerned. The rest of the world, however, has done risk assets have done better and gold has done better, which is gold doing better. That's not really all that surprising. Gold has been held down for years compared to where it should be in terms of percent of value. Anyone who's a real Bitcoiner wants to see gold doing well, because it means when Bitcoin finally eclipses, it'll be worth more. I'll give you something that was shocking, Dave, last week,

when we didn't see an all-out flight to safety in U.S. treasuries during those auctions. That was shocking to me. The 10-year and the 30-year were absolutely awful, awful. And so it showed that investors are expecting that we're going to have an onslaught of treasuries in the future and that they're demanding for higher rates. So a flight to gold makes sense to me. The other thing about the treasuries are, but you were shocked by it. I remember reading your post and I'm thinking, yeah, but we're sub 4%. Now, of course, we're kind of getting closer. We're inching up. We had a day that the Nikkei was down 12%. It was down 20% in basically two and a half days. And so it was surprising to me that they were that weak. And I don't know,

I'd be interested to hear what Mike has to say about this because he's been a bond guy for a long time. That's exactly right. And we have, Mike, you're going to go, but we have literally a story in Bloomberg that I wanted to show you because I knew it was red meat. Bonds are back as a hedge after failing investors for years. TLT, baby. So how are you doing this? So I'll repeat my base case. I think for the next few years, risk off assets will be some of the best performers. Gold's already doing it. It's three years now. It's beating S&P 5 total return. You don't see that in CNBC, which I'm looking at right now. And treasury bonds, as we head towards a normal deflationary period and head towards yields to

the rest of the world. The top five major countries in the world just a few months ago were yielding the 10-year notes for about 100 base points above the US. China is still almost 200 base points above the US. The US is just still almost 200 base points above the U.S. U.S. is just heading that way. And yes, we all have deficits. We've always, I'm not going to poo-poo that, but I've heard it since 88 when I first started in trading pits. Anytime people say short treasuries or yields are going up because of too much deficits,

they've lost a lot of money. So I'm looking at that tilt over. And the bottom line is the U.S. stock market has to stay elevated. And it's just starting to show cracks in Bitcoins leading the way. So I completely agree with that consolidation trade. But you just look at 200-day moving averages of gold, Bitcoin, S&P 500, they're on the same track, except Bitcoin's now below it. It's since last week, almost two weeks now. And it's either going to be a buying opportunity or it's rolling over. I think it's rolling over and there's a very good reason. Bottom line is stock market value in the U.S. is bottoming. Let's just say 200-day moving average from the lowest in about six years. I think the yen carry trade is significant, but it's a significant tree in the force of what's happening here globally. China's heading towards a bit of a depression, way overdue. Just look at their bond yields. Commodities, Bloomberg Industrial Commodity Index was up 24% in the year.

Now it's down. Bloomberg Commodity Index was up 12% in the year. Now it's down. I just, from this morning's meeting with Anna Wong, she really pushed back in this sense that this latest unemployment number was a one-off. She said temporary layoffs typically are early in recession. It's happening and the things are happening with automakers in California. 4.5% unemployment is still their goal for the end of the year. We should see an uptick in core CPI this week, which is bad for the Fed. The whole world's tilting that way. We're seeing

declining demand and excess supply in crude oil. Copper's had its correction and it's going back down. I think the whole world's tilting that way. And then you look at the US yield curve, it's still the most inverted on a 30-year to Fed funds basis since 1979, 1982. I remember that. My dad described it. He was a CFO of a steel company. It's a pretty significant recession. We're just starting to tilt that way. And then the stock market is just rolling over. Everything is just making the turns. You look at the 200-day moving average of the 10-year yield, it's just starting to turn down with commodities. Volatility is just starting to turn up. To me, this is just getting started. This is going to be a trading opportunity of a lifetime. And Bitcoin, I think, is going to lead the way, unfortunately.

The question I want to ask you guys then, we obviously had the Black Monday. You don't believe it's necessarily the end carry trade. Dave is literally dying to argue with you, as I can see on his face. But as Dave said last week, our consensus was sort of like we needed to give it a bit of time to settle to see if there was going to be any contagion or who was actually affected, if there were going to be blow ups, if there was going to be collapses. I haven't heard anything as of yet, but maybe that takes a lot more time because if it actually unwound and people have just given up on the carry trade and that's all we see, then all engines go, right? I mean, there's no reason to believe that we're going to see some major contagion. And James, I can kind of see you shaking your head, but it's just too early. The significance of it is, there are two

things. I mean, it basically just signifies that free money, the era of free money out of Japan is over. You know, that's the way we're pushing. And so that's number one. Number two, it shows just how much leverage there is in the system again, that you could have a 0.15% raise in interest rates in a country that had their interest rates are now 0.25% at the upper bound could cause a cascade of selling like we saw. That's just, it's astounding. And so that's just something that you have to keep in the back of your mind. Is the trade over?

Well, I mean, we've got all kinds of estimates out of everywhere. And you've got JP Morgan saying it's half done. You've got Morgan Stanley saying it's 60% done. You've got LT, God, what's the, I actually quoted it in my newsletter. It's in your newsletter. I'll find it. Yeah, yeah. But the point is that you just, who knows? LTL Financial. Yeah. Yeah. But the point is that you just.

Who knows? LPL financial. Yeah, exactly. And so who knows how how far this trade has to go? And is it is it the big tree in the forest or is it just a branch like like Mike says? And I think it's it is just a branch. And that's probably even more alarming, but it's showing just how leveraged the system is. As far as Bitcoin's concerned, there's a lot more to Bitcoin than just a risk on asset trade and play. The thing is with Bitcoin is we're seeing capitulation in small miners now. They just can't keep up with the hash rate where it is. Hash rate went up last week as Bitcoin went down. So that makes it very

difficult. And I'm not even talking about the public players. There are thousands of miners around the world that are just struggling. And I've seen it. I've heard from them. They're asking me what's going on. And the problem is they're playing chicken with the price of Bitcoin. They've got these long-term energy contracts that they're trying to make sure they operate over with enough revenue. And so they're not making them to meet the margin. They have to sell some Bitcoin. And so it's self-fulfilling. And we've seen this in other halvings. And it just grinds sideways or lower until it doesn't. And then once you do have that full capitulation, it's over. And I can see, I mean, I'd be interested, again, what Dave has to say and what he's

seeing on his side. But that's kind of what I'm seeing. And so you can't just isolate Bitcoin as a risk asset only. There's other things that are going on with it. At the same time that we're seeing true institutional adoption of it, where you actually have the large institutions and money managers who are, they're giving into those requests from the high net worth individuals that like, we want access to this. They're like, okay, fine. We're going to give they're giving in to those requests from the high net worth individuals. Like, we want access to this. They're like, okay, fine.

We're going to give you access to it. And that's the first step. Look, last weekend proved Mike's thesis wrong, full stop. The fact is Bitcoin is a network effects asset. No, virtually all of Mike's thesis is intact. Actually, last weekend proved it, proved in terms of where the thesis is intact. Actually, last week improved it, proved in terms of where the leverage is in the system. I mean, I have a few points here,

but I want to get to the core point where Mike and I actually disagree, because when you talk about market cap to GDP at 200%, that's where you should be focusing. And you didn't mention that this morning in your monologue, Mike, which disappoints me, because that is the most important one of all the doom facets here is how long can this thing go before there's a stock market correction when it is clearly overvalued compared to the productive capacity of the United States?

And if you do it on a global basis, it's actually arguably worse. But the GDP numbers are a little bit, you know, iffy. The reason that last weekend proved it is it's very straightforward. Bitcoin is a network effect asset. It is an early, it is a adolescent network effect asset. We know that at network effects where there is an acceptance that Bitcoin is a store of value, its price is 10x or 15x where it is today. We know that. And the thing that's important, what we learned last weekend is the investors, the new investors into Bitcoin

also know or believe that or they would have puked it on Moss and they didn't. And so, you know, every time I see tweets from Jim Bianco and he talks about, oh, he was the guy just, you know, sorry, Jim, but you were the guy who said that the Bitcoin ETFs would enhance volatility. And if I go back through the internet, I don't have the time or patience to do it, but I have a pretty good, not quite didactic, but a pretty good memory. You said the first time we get a panic sell off in Bitcoin, the ETFs will accelerate the crash. And guess what? They did exactly the opposite. And the readership same thing when they launched.

Very hyperbolic about the guarantee that that would happen. Yeah. And it is a very big deal. So what did we learn? We learned that the people who are accumulating Bitcoin as a piece of their portfolio, like these small pieces, are like, eh, volatility, I don't care. That volatility, however, was carved out in the statistics, were carved out in a regime where these investors did not exist, were not part of Bitcoin. So looking at a beta and at volatility as a beta of Bitcoin to the market over years, when most of those years it was literally a totally speculative asset without any institutional adoption. And now as they're starting to put their little pinky toe in the water,

and we've heard from Matt Hogan and we've heard from a lot of other people on Crypto Town Hall that, you know, we talked about it, the Morgan Stanley 15,000 RIAs. Well, it's all the RIAs. We'll be talking about it slowly but surely. And the best estimates were this would start in September or so. And guess what? What happens in the fourth quarter? In the fourth quarter, people readjust their portfolios. That's just math. That's what happens every year. You get window dressing and you get what are we going to do for the next year? And so to expect that you're going to use a notoriously unstable thing, which is beta. And Bitcoin has been in burst with the stock market a lot over the last six months as well as it's been in this range.

I just dispute that basic assumption. Now, everything else Mike said, I'm on board with. I am on board with the notion that we are likely tilting into recession from a perspective on unemployment. I think that the only reason that the market didn't undo its, we're going to cut rates, is because the market is betting on recession. And so they're putting money into risk assets. But the Russell had a huge bounce last week, which is the opposite. So something's wrong. The last time I saw something this messed up in the market where you get the smart money investors or bond investors saying

one thing and the stock market saying the other was 2008. Actually, 2007. It feels like you just gave Mike a 97 or a 98 on the test and an F. No, I get it. That's the point. Everyone thinks this is Mike and I disagreeing. I agree with him on 95% of the thesis. You think? It's a network effect asset.

We're getting network effects. I got to follow up on that. I've been reading the book lately, Chaos Kings, a lot about Mark Spitzanego. I used to work right by him at the Chicago Board of Trade. Don't really know him personally, but there's a little phrase I learned in the trading pits, and that's

don't be a weenie for the teeny. I have to warn you, babe. You got to define teeny for people because they don't know what a teeny is. Well, it's a small trade. He didn't say teeny. Back in the day, for all the people who are watching,

back in the day, we used to trade in eighths. Quarter, eighths, and then we went to sixteenths, which was a teeny. We used to call it a teeny. If you go to your library and which was a teeny. And so we called it teeny. Yeah. If you go to your library and look up a Wall Street Journal from last millennium, from before 2000, you won't see stock prices quoted at 25.03.

You'd see 25 or 25 and a quarter, a 16 or 25 and an eight. That's what he's saying. Believe it or not, that is how the entire stock market would trade it it was insane yeah so it was great for me because we were in arbitrage it was a built-in spread all the time yeah yeah it was a great way to make money that's something that the history of markets a lot of us missed that and the thing about the trading pitch you can pay one bit of two all day and just make money playing the flip, we used to call it. But the key thing I want to point out is the teeny I'm pointing to is the VIX obviously getting to 60 was quite significant. So with Bitcoin going from 50 to 60 was a tremendous trade. Don't differentiate the difference between trend and trade.

The market's rolling over and volatility is bottoming from a multi-year low. Stock market's potentially peaking for the highest levels ever. This is just getting started. The Fed is not going to hike much more. It's got to go 25 basis points, maybe still a month from now. It's just getting started is the way I see it. So don't underestimate the power of mean reverting volatility. That to me is a bottom line here. So we have the S&P 500 still up 13% in the year. For a while, it was up over 20%. We all knew that was too much. Now you have to be buying everybody. And when you see, when everybody says buy the dip, that's the lessons I learned. It's like, good luck with that one. You're buying the dip with volatility, just starting the bottom. It's a lesson that made

some of us a lot of money in 2008. So this is just happening. I think it's just a big macro trade. And the fact that Bitcoin levied everything up on the way down, on the way up, I think it's just a big macro trade. And the fact that Bitcoin levied everything up on the way up, I think it's leading on the way down. And here's the thing I want to point out is it's below its 200-day moving average. It's below its average price since ETFs were launched. And everybody tells me all these incoming money is going to make it go higher. I think it's telling me it's a mainstream asset class. It's three times the volatility of beta, three times the volatility of gold.

And as beta goes down, which I think it'll continue, Bitcoin should lead the way with probably at least three times the normal on a risk-adjusted basis. It's below its 200-day moving average, at least for the next conversation. Let's get it up above its 200-day moving average. Mike, you said it's below where we've been trading before the launch of ETS. That was 47. We're at 60. So it's definitely trading well above when they started trading. The average price since January 10th in Bitcoin is $6,600, roughly this weekend's high.

That's the average price since people who are allowed to buy the mainstream mom and pop can push a button and buy ETF Bitcoin. I'm telling you, it's failing. The average price. I'm just pointing out the fact so it's one thing that people i've pointed out some things it's just a really odd thing to be accused of cherry picking time frames when you have as much depth and been in the markets this long as i'm pointing out patterns that i see disconcerting that should be aware of especially for people who might be overweight this asset and kind of ignoring the potential for it to just go back down the way it usually does. So I'd like to see signs of strength, divergency, but it's not. And I'll end with this. What Dave

said that Bitcoin is still, this is not even from the trade I'm looking at with the bond yields going lower and gold going higher is leading the way is just getting started. And it has to really get, you have to see at least signs of a bear market and a stock market. We're not even there yet. And we're so overdue just for a normal reversion. So you talk about reversion and you mentioned two stats that contradict. So Bitcoin's below its 200 moving day average. The S&P, the Russell, the NASDAQ aren't even close. And that's the point. I mean, one's right, one's wrong, et cetera. I think that gives Bitcoin significant scope to get back towards the top of its range. But Bitcoin is not an average. It's not an index. It is an asset, just like NVIDIA is an asset. Whereas NVIDIA trading vis-a-vis its moving average, where, you know, what's its volatility relative to Bitcoin? NVIDIA, by the way, being part of these indices is far more likely to be a leading indicator and leading the way up and down than something that's completely uncorrelated and something that's completely different. And that's really the essence of what I'm saying. It's that, look, there's no doubt that if we get an October crash, which is unlikely in an election year, but can happen, that if what we end up with is the spigots turn

on in September and it looks like unemployment is getting worse and worse and we get an October crash, then in such a thing of a crash, a 25% down, yeah, everything's going to go down. There's no question about that. We saw that this past weekend. We also saw that basically, when it was not crashing, when not crashing happened, we ended up back in the trading range and pretty much everything. And that goes to show something. Remember, my base thesis is this market is the markets that we talk about all the time are, whether you use the word manipulated or controlled, it's there. Now, we talk about the Fed put. I mean, look, I think the Fed would like to see a wealth effect that is lower because that would decrease aggregate demand and help them with inflation. But that same Fed can't afford the wealth effect to go completely into reverse where people basically don't have the ability to live anymore because that will cause enormous political pain.

So they're trying to thread a needle. And to be blunt, they've done a pretty good job so far, which kind of strangely, but it's true. The Fed loves yields down below 4%. We were worried a year ago, looking at it, not quite a year, it was last fall, yields are at 5%. The bond auction that James chronicled basically says, yeah, the market doesn't really believe in these yields at below 4%. So they're trying to find equilibrium. And equilibria in a market that is worth U.S. budget deficits as far as the eye can see. And look, what was not talked about is very important in terms of election odds. So Polly Market went from 70% Trump to a coin flip to Kamala favored.

Let's understand what that means. Right here. Right? Let's understand what that means. So that means, look, at any significant Trump, Bitcoin is massively underpriced because his policy as articulated in his speech and in the Republican platform is a significantly higher Bitcoin because it'll be a trade. And we'll talk about that closer to the election again. I don't want to reprise that. But the math basically says

50% on the kind of gains that Bitcoin would have, it's not priced in. And so that's why, this is why Bitcoin didn't fail to 70,000. It would be at 70,000 if Trump were still at 70%. I don't think anybody would dispute that. But what people are not talking about is look at the small fractions of platform that we do have is still increased green spending, increased spending, increased spending, increased spending. And if you think that there's even a snowball's chance that budget deficits will come in under the next administration, I don't think it comes in under Trump, but for sure under Harris, it does not come in. And so something's going to have to give in the bond market and someone's going to have to do something because that's the issue.

That's what they're going to be focusing on. It's government borrowing. And we all know that. So what do they need to do to make that work? Well, you know, they need to keep easy money conditions, but they want to be tilted toward asset prices. That is that is their avowed goal. Now, I don't say it's easy to do. At 200% of market cap to GDP, that gets really, really hard to do. It feels like you're trying to keep something floating in a world where it's just too much. I mean, you can't have people earning 10% a year or double bond rates in a riskier asset, it's actually been higher than that since 2009. And we're going on 15 years of bull markets. I mean, in your data set, Mike, has that ever happened before? What's the longest? The longest was from the end of World

War I to the crash, right? The biggest bull markets are the longest without a new high, you mean? The longest bull market, the longest without a 25% or 30% correction. Well, the longest bull market in history were the 50s and 90s in the U.S. And the longest period of a gap of all the new highs was from 1929 to 1954. And the S&P 500 depends on which year you look at. But the one key thing I want to point out, I think is a flaw with, I mean, I love this. We have a great juxtaposition here. And I like how Dave points out, you know, let's praise those Bitcoin gods. I say pass up the ammunition.

I'm saying Bitcoin is still in a hangover from a perfect storm for new highs. And it's showing every sign of being an underperforming, lagging, leading indicator. I want to show the others. Show me some beef. Like I said, now it's below the 200-day moving average. Now volatility is starting to pick up. As we're speaking, I just overlaid the 200-day moving average of VIX with the 200-day moving average of TLT. They were just starting the bottom, just getting there. Everything to me says Bitcoin is leading the way to a normal correction of this bull market we've had in stocks most notably since 2009. bitcoin was there it led the way and show me signs of divergent strength right now i'm seeing nothing but a perfect sign for a new high and a perfect um not a perfect but an enduring hangover that's just starting to kick in and like

i see him for commodities with the bloomberg industrial and boomer industrial middle index was up 24 percent and the year. Now it's down. This is all turning over, and Bitcoin's just leading the way, is the way I see it. Show me some strength. But it's the opposite. I understand that that's, from a technical point of view, since the 22 highs, since the 22 crash, since the 21 highs, I understand what you're saying. I don't agree that it matters, but I understand what you're saying. The investment case for Bitcoin is identical in terms of its ethos, in know, in their mom's basement in Asia can trade. It just doesn't exist.

There aren't an army of people where the marginal buyer that does all price discovery until they're not, and we saw this in the spring, in the winter, so we know that it's not always. I mean, Bitcoin was led up by spot buying and all these people were left. It was never, every time I FOMOed it, they out, they raced ahead and they were like, you know, if you ever watch the old cartoons with, you know, with Roadrunner, right? You know, Wile E. Coyote would chase the Roadrunner and they would be in a cloud and the Roadrunner would stop and the Roadrunner would be on a mountain, you know, and Wile E. Coyote would look around, the dust would clear and he was standing on know on and the and wiley coyote would look around the dust would clear and he was standing on on an air and he would go and fall what ended

up what we have seen repeatedly over the the rally over the last nine months are actually it was last summer as well we've seen repeated rallies that got overextended by the marginal leverage traders that don't exist in gold. And then the correction is back down. We've seen that. But the investment case for Bitcoin is a sound money case, just like gold is. And so that's why reason for saying it should be leading the stock market one way or the other. I have a problem with that because the fundamental reason for buying it is exactly the opposite. It's, but you just pointed out that it's the most highly speculative, high volatility, 24 traded, 24 seven traded risk asset in history. And here's one good example.

Right now you look on a typical big Bitcoin screen. When I see my Bloomberg colleagues on TV say, oh, it's, it's up 2% on 1.5% on the day. No, it's not come up maybe from Sunday, but compared to everything else is measured right now from Friday, it's down 2%.% on the day. No, it's not. Maybe from Sunday, but compared to everything else that's measured right now from Friday, it's down 2%. That's the problem. You can, and that's what attracted me right away. It's an ex-trader in the trading pits. Still have that twitch.

It's the best asset on the planet to trade in. And when it goes this, you got to expect there's massive leverage all the time. And it's turning over. This leading indicator is just right now. I've been saying it for a few months. I'll keep saying it until it shows me otherwise. It's telling you to get out of risk assets because it's the riskiest of them. and it wasn't puking. And what did it do last night? Well, we were sleeping while they were awake. Crap, we better cover because the U.S. is going to be going to squeeze our shorts. And yeah, it's a great trading asset. All wonderful. But I got two points. One is kind of a funny one. And it that we're currently trading is going to trade like Bitcoin does within within the next 15 years, maybe 10 years, five years, could be two years, but it probably won't be more than 15 to 20.

Because the future are is everything trading fully multi currency and digitally. Larry Fink believes that I've been saying it since you've known me and before that's going to happen. And when that happens, then it's no longer, oh, well, it since you've known me and before. That's going to happen. And when that happens, then it's no longer, oh, well, it's the only thing I can trade. Now let's trade everything the same way. And understand that is what's going to happen is you will have trading 24-7. Long time now. Presently in the way down the road.

It is a much more efficient way of doing it. But never forget that what you trade matters as much as what you can trade. And Bitcoin is different. Now, notice we haven't talked about Ethereum, which, by the way, we should talk about. Yeah, I wanted to pivot. I actually wanted to pivot there, Dave, because and then I'll let you go on this. But last week, you made a point earlier that Schiff and Bianco and all these people said that ETF was going to contribute to more downside volatility because those people would puke and it would get worse. The fact is, we've seen exactly the opposite, as he pointed out. Last week's inflows in the crypto products indicate unanimous positive sentiment from coin shares. James Butterfield, I believe, wrote this report.

He's on here all the time. But we ended up by the end of the week seeing net inflows into the Bitcoin spotty, albeit small, after the kind of rough Monday and Tuesday. But what was more surprising, even with the ETH sell-off, is that the Ethereum products performed exceptionally well and were the bulk of these inflows. $155 million of the $176 million total last week were Ethereum. So I think Ethereum is worth talking about because Ethereum also trades 24-7, also trades all the same things as Bitcoin. And Ethereum's investment case, whether you believe it or not, and we have a very crypto savvy audience here, it doesn't matter what we think. There are tens of thousands of salespeople that are marketing Ethereum ETF as

the only investable way to invest in crypto technology platform. So we may say, well, wait a minute, there's Solana, there's SWE, there's whatever. We can say whatever we want to say. But right now, there's an army of financial advisors and salespeople that are gearing up to promote Ethereum as the only investable way in the us to invest in a tech platform and that makes sense in my mind to be correlated to the nasdaq of course it does now you can look at it and make the statement what we saw last week when it when bitcoin dropped we saw the bitcoin ethereum ratio which had been steady, it would have been in a range forever from 0.048 to 0.06, 0.06 was kind of high on the Ethereum ETF announcement. We saw it drop to 0.042.

Over the weekend, it's rallied to 0.045, still below the original range, but that's not a trivial, that's not a trivial move. This is stuff that the crypto traders are really looking at, and it's red meat for that. If you really believe that a crypto asset is going to lead the NASDAQ, it should be Ethereum. In fact, if you look last weekend, it did. In fact, when everything was crashing, Ethereum crashed the most. Now, there were reports it was jump trading, liquidating, whatever the reasons, it at least makes sense but but i like to look at reasons and i'm not a i'm too much of a trader in my head to be a pure graham and dodd fanatic but the fact is is value and and fundamentals matter and bitcoin's fundamental is a vote against

uh opting out of fiat currencies as a hedge, just like gold is. The only difference is it's undervalued because it isn't gold and it's still a wannabe hedge. So it's going to have scenarios that are different. And in statistical arbitrage, and I ran two different stat arb desks, the one thing that quants worry about, and you can hear a variety of very smart people, way smarter than me and my old firm Two Sigma talking about this. One of the most important things they always counsel about is be careful about the regimes you're in and make sure that things haven't changed and you're still following old correlations.

So I'll give two practical examples of this practical example. When you have, when you're running a model of correlations, the strongest signals when you're buying the low and you're selling the high, the strongest signals generally are wrong. Why? Because it's saying something fundamental has happened underneath. And it's not just correlation anymore. You need to be worried about that. Because you want me to end out and there. Yeah. The Ethereum spot ETFs give more evidence to what you're saying, certainly, because now we have a legacy TradFi product that you can look at and see how it performs versus

Bitcoin. But the flip side of that is that anytime we see a significant move down from Bitcoin, Ethereum and every other altcoin disproportionately dump to the downside. So I don't think there's anything new there. It almost even lends some credence to Mike's point that Bitcoin sort of is the market. It's the index, as you guys were arguing before, and the rest of it sort of moves. So I don't think that Ethereum is necessary. I agree with you in theory, the investable case for Ethereum, when people find out about it and when these advisors start to dig into it, will be more like a tech platform or NVIDIA. But I don't think what's happening now indicates that yet because they still haven't heard of it, you know, in my opinion.

So I think that this was more of a normal crypto bitcoin dumps everything else dumps 10 more percent you know and uh but but but we will see i think in the future i i wanted to pivot a bit um you kind of brought up harris obviously that's been driving a lot of bitcoin price as well now she's coming out and saying, interestingly, that she won't interfere with the Fed being one of the big stories here. Does this momentum from you guys to just pivot slightly to politics, like does this momentum for her surprise you? And do you think that this is actually extremely meaningful for what's likely to come in markets? I mean, the things that Mike is largely pointing at, that he points out every week, are kind of in a political vacuum. It doesn't matter. Those things are going to

happen, right? Unless somebody can pick the can from the down the road. I mean, James, what do you think? Well, the first thing to answer your question is it's really difficult to know exactly what that momentum is. We're being fed a lot of information from mainstream media and there's been a lot of so you know excitement around this new candidate and uh and the you can see the mainstream media machine kind of assemble around her and it it's clear they're they're every single article is about harris and what she's going to do to fix this, you know, the, the country, even though she's been in office for three and a half years in the second highest seat, you know? So it's kind of, it's, it's disingenuous. And, and,

and I know that there are people around me, at least who are seeing this and going, but nobody ever voted for, like, I don't understand why we're, why we who are seeing this and going, but nobody ever voted for her. I don't understand why we're talking about this. She didn't win one delegate ever, and here she is as the candidate. It's difficult to understand and know what the reality is. I don't know. We've heard reports of her hiring actors to come in to the rallies. You've seen the AI stuff, that they faked photos of the rallies, whatever it is. I don't care. All I care about is what is the same criticisms they had of Trump. What's the reality? It's like, it would be nice to know the reality. That's all.

Yeah. And so, yeah. And so it's difficult to really put your finger on the reality of that. Really quick, Dave, before you jump in, yeah, James, you finished, sorry. No. But what I was going to say is that one reality we know is that this administration has been absolutely awful for cryptocurrency and Bitcoin the last few years. It's been absolutely abysmal for it. We know that. That's the only thing I know about it. I have felt it through Chokepoint 2.0. We've talked about it. They've got now this crypto for, you know, crypto for whatever. It's not even Harris for crypto. She's got it backwards.

Like, send me your crypto. I'll send you two back kind of thing. You know, so like, you know, like anything they say about crypto, I'm just going to I'm just going to table because I can't believe one thing. But as far as Trump and the others mean, they're trying to understand it. That's encouraging, at least. And we've got a conversation around it. But it's political rhetoric. It's difficult to know what their real positions are going to be once they get into office, except for the current administration.

We know what the current administration thinks. Let me react to you. That's a very, really quick, Dave, I just want to say before Dave, before you jump in, we do have polymarket, which I showed before. And Dave pointed out polymarket 52 to 46. Now Harris, it was at 72% Biden when Harris got the nomination or got the nod. And I just want to point out a bit of maybe cognitive dissonance in the crypto space because when Trump was leading, this was the definitive gauge of what was likely to happen because it was people betting with their real money and that's better than the polls.

And now it's swung the other way. And literally the narrative I see on Twitter is that Polymarket is manipulated and people are just making the bets to show it this way. That's pure Kofi to use it to use them yeah that's what that's what i that right but if holly market is legitimate she is we we can say it's fake momentum but if we do market people betting their money when it was at 46 or 52 look in poker we call that a coin flip that's ace king against pocket queens

anyone who doesn't play poker understand that's what this is this is a coin flip that That's ace king against pocket queens. Anyone who doesn't play poker understand that's what this is. This is a coin flip. That's what this election is right now. With all the histrionics, the market is saying it's a coin flip. I personally think that's exactly right. It's a freaking coin flip. Trump against Biden, if Biden stayed in the race, Trump wins and the market was right. At 72%, it was basically accurate. But i will tell you something else about polymarket the day before waltz was was at 100 on polymarket shapiro was at well over 70 on polymarket because first of all it's not americans it's people betting you know it is what it is you know it's only when you get the herd will it matter. It's too early. We haven't had the convention.

We don't know the politics. We don't know what she believes. Well, the only thing she believes is the one thing that Trump put forward, which is cut the tax on tips because, let's call it what it is, Nevada is a pivotal state, and they need the state, and it's all service industry. She's been here three times that I know of. She's probably been here more. But she's been here so much because they need this state. So that's just the only – we don't have any policies. She hasn't had any questions. It was notable because it was the only time where she agreed with Trump because she had to.

But the story you put up before, Scott, you put up a story and I'm going to make a statement. The reason Harris can afford to say, I want the Fed to be independent is because the Democrats can say, have the illusion of Fed independence. When you control the media and you control the levers of pressure, you don't have the need to say, I want you to do what I want. The reality is, is the Fed has been acting in somewhat politically the whole time and always has. It's responding to jobs. It's responding to what it is and what their primary concern these days is to try, try and minimize the cost of government borrowing so we don't get into a debt spiral. And Trump might break that because he's an idiot. In fact, he wants to and doesn't understand it because he's, you know, whatever. As far as the rallies and all that stuff and the identity

politics, I just wish he would just, someone would just muzzle him. Because at the end of the day, none of this matters. What matters is the reason there's so much enthusiasm around Harris is because of people really having antipathy to Trump, the human being. That's all there is. The fact that her policies are the policies. We don't know what her policies are. I mean, they're claiming she's pivoting. The fact that the single most leftist center to the left of Bernie Sanders and Elizabeth Warren, when she was in the Senate, is going to pivot somehow to be this moderate candidate, is it strange for Julian? But who knows? I think Mike, Dave, I think Mike has to run in a couple

minutes for a TV shot. So I wanted to kind of give you a last word. And Mike, I don't want to put you on the spot if you have to leave right now. But he just kind of mentioned we were talking about the Fed and there's this article in Bloomberg. It's inflation week in the U.S., but everyone's talking about jobs. I don't know if you have a specific thought on that, but I found that really, really interesting. People are pointing to that job number as the reason things got volatile in the last week, but it seems like we're just making up narratives at this point. Trees in the forest. The Bloomberg Economic Surprise Index right now is about a 10-year low. Everything is tilting this way.

I've been writing about retail sales for over a year now. U.S. retail sales minus the CPI is the worst since right before the big plunge in 2000 and 2002 and the great financial crisis. It's the distortions of what happened with COVID, biggest money pump in history, the Fed and way too much liquidity all reverting down lower. And that's why I like to point out lately is, you know, the models are great,

but break out the textbooks and the history books, which is I've been way overweighting. And as we're overdue for just some normalization in the valuation of risk assets and the number one leading indicator for all those people who wanted to get rich and are trying to get rich now is Bitcoin. It's just the one place to watch.

And hopefully I'm wrong. But again, as we speak, it's ticking down. It's below that 200-day moving average. And I see all the bond yields and things that are kind of risk off in gold ticking back up. So it's just getting started. So I look at it.

And also the election's a key thing. But one thing I'd say about the election is it was obvious that Biden lost the press after the debate. Right now, Harris completely has the press. Well, not completely, but has the press. It's for her to mess up. And most people know they just don't want to vote for this unpleasant human being that we've had already had four years of him. It's like Dave nailed it. And I see it from lifelong Republicans. I was a member of my town like Dave nailed it. And I see it from lifelong Republicans. I was a member of my town's Republican town committee. And I've always been a moderate, but I just, lifelong Republicans, I just can't vote for that crazy man, to quote my mother.

And by the way, all the lifelong Democrats are saying after the debate, I don't know if I can vote for that old man. So we have this unique situation where I think the bulk didn't want to vote for anyone. Yeah. So I'm going to share this, Scott, if you can bring it up. So why is that article important?

It's, it's this, this is what we're talking about. If you can see it. Can you guys see this thing now? Yep. Okay, good.

So this is what they're talking about. Look at this chart and tell me, as you see unemployment tick up here, do you see it reversing? There you go. Just look at that. Does it, when does it reverse when it starts to tick up? It doesn't. That's the problem. That's what people are concerned about because once that momentum starts, it doesn't. That's the problem. That's what people are concerned about. Because once that momentum starts, it doesn't stop. And you get this spike up in unemployment because it cascades. They feed on each other. You've got people lose jobs. They stop spending money. Service industry, they start pulling back on servers and you get them to lose jobs and they stop spending money, it just cascades into this spike of

unemployment and it happens in every recession. And that's what people are concerned about. And should they be? Yeah, they should be. And this is just reality. This is not doomsday. This is just how it works. This is how these massively monetary manipulated cycles work. This is how they work right here. And this is good. This is what the dual mandate, right? It's,

it's inflation and unemployment in theory. I mean, a lot of people like to point that they have. Yeah. Yeah. The, the two, the two mandates are,

are price stability and full employment, but, and this is what they're looking at. So are they going to pivot before they they're going to, they're looking at this very closely and, and this unemployment number that, or the, sorry, the jobs numbers that comes out later this week're going to, they're looking at this very closely and, and this unemployment number that, or the, sorry,

the jobs numbers that comes out later this week is going to be important, you know, and to see just where they stand. And if this momentum is picking up and they're going to be, they're going to be, their eyes are going to be all over this. So I think jobs this week, right.

We have CPI and jobs. CPI and jobs. Yeah. And yeah yeah retail sales yeah everybody's watching so yeah the uh acclaims number thursday morning everybody's watching things somewhere and are we at a are we at a point where if we get quote unquote good news it's actually good news is the fed cut so baked in for september that we can actually get good news it's good news i think bad bad news. It's bad news.

Where if unemployment goes up, is that good? Because the Fed has a more chance of doing a bigger cut. Yeah. If it goes up just enough, it's got to be that Goldilocks thing, you know? Off landing. I mean, yeah, just a little bit, you know? So it gives the Fed firepower to start those rate cuts. Cause the,

the, the, the market is expecting a full percent of rate cuts. I mean, I've got here. I mean, I, we can,

we can share this and you guys can see this. It's, it's, this is just what the market is expecting now. And so, you know, you can't ignore this. You see it. I got, yeah, I'm bringing it up right now. And so, you know, you can't ignore this. You see it? I got, yeah, I'm bringing it up right now. The market is expecting, you could see the implied rate under the side here,

you know, by September, the implied rate is below five, you know, it's 4.6 by November. And then by the time we get to December, it's four point three. You know, that's over a full point of rate cuts. So I mean, but we've been seeing that, you know, are they finally right? Because we've kind of joked that we've been seeing the same thing since twenty twenty three spring. Well, I would I would I would say that this indicator is a lot better than the Fed dot plot.'s put it that way yeah and mike you agree with that because you and i we've said there's no reason to cut there's no reason to cut there's no reason to cut now now they're going to cut the at at 300 base points above the ppi rate that's the highest i mean the average in the last 20 years is 100 base points below so we're and

chairman's policies all the time we're very restrictive. But that chart that James showed us, it's 100% probability we go to 6% based on data since 1947. Okay, I'll go with that. And the market's all tilting that way. And that's why I think things are just getting started. That's why I stick with gold, treasury bonds, and everything else. Just good luck. It's overdue.

Mike, it goes to 6%. Mike, yeah, you can go, Mike. I'll ask James really quickly. Thank you, Mike. Appreciate it. Thank you. James, it always goes to 6%, as we said, and we're going to wrap in a second anyways, but couldn't that happen a year or

two or three years later than you expect? It always gets to 6%, but it doesn't mean that this turn up has to go to six percent but is it happening a year two years or three years later because we thought we were in a recession back in early 2022 if you remember we had negative gdp numbers so is it happening well why is it happening now because the fed's cutting to the end of its rope of of fiscal dominance and how they can actually you know know, control this, the, the, the landing

here with the, just the massive spending it's coming out of Washington. Can I ask one question, James? Yeah. If you took a government employment, employment by governments was factored out of the equation over the last three years, what is the unemployment rate? Yeah, I think, well, not just that they've, They've hired hundreds of thousands of people in the last few quarters. So it's hard to say. I haven't done that study.

But for people to try to understand what fiscal dominance is, you toss off that word casually, and you and I both know what it means. What it means is the actual economy has been arguably contracting. The private spending $2 trillion more and therefore propping it up, except for we all know people don't like to admit this, especially on the more extreme on the left, that every dollar spent by the government pales. And it is not, it's the opposite of a multiplier effect in terms of private sector spending and so it's not good and that's where we're at and that's where we're

at and so once the private sector turns over and you watch the watch those that service industry because once that turns over it's kind of game over and and it's just momentum that's the problem here and that's what we're fighting could we have this thing kind of ease up? It's possible. But, you know, I'm looking at this chart and thinking, I don't have a really good feeling about this. That's it. It makes perfect sense. We've just seen a lot of timelines.

You know, I think predictions are easy. Putting them to an actual time frame is extremely difficult. The last thing we were talking about, Dave, last week, you and I were talking about this on Twitter, was you're seeing an uptick in credit card delinquencies of over 10% now. And that's a red flag. Does this mean that we're in recession? No, but it is a red flag. It's yet another thing. It shows the consumer is kind of struggling. They've tapped out their credit cards.

For the first time, we saw credit contract in the last reading for the first time in delinquencies, that means that the consumer has reached their limit on average. And so that is another red flag. So it's just something to keep an eye on. All right, gentlemen. Thank you so much. 901. Sorry, Dave, I know you want to jump in. No, it's okay.

I think we said it already. Thank you so much. 901. Sorry, Dave, I know you want to jump in. No, it's okay. I think we've said it already. Thank you, guys. Another amazing Macro Monday. Oh, somebody just walked past. That was funny. Like the Austin Powers. That was awesome. Didn't get distracted at all. Perfect. The chat's going to love that cameo right there. All right, guys, we'll do it again next Monday, obviously. Same time. It's going to be interesting to see how all this continues to play out over the coming week. Thanks, boys. Talk to you soon. Bye. Let's go.